Microsoft - for reasons that haven't been plumbed enough to satisfy skeptics - has set up a wholly owned open source subsidiary. Given history that's an unusual step.

It's called Microsoft Open Technologies and it'll be run by Jean Paoli, an XML standards expert whose interoperability strategy team will form the nucleus of the new subsidiary.

Figure about 50-75 people and a board composed of Microsoft people. Paoli will be president.

He's credited with calming the ISO brouhaha between Open Office XML and the competing OpenDocument contingent.

His new domain is supposed to advance Microsoft's investments in openness, he said in a blog posting, including interoperability, open standards and open source. Through it Microsoft should get out code more quickly and ensure compatibility.

Evidently Steve Ballmer's view of open source as a "cancer" must be in remission.

It suggests that Microsoft recognizes that it lost the war, that open source is now pervasive - even in commercial software - and that it's got to deal with it to survive and retain its influence with developers. There could also be an unspoken legal angle to it. Some sort of buffer, perhaps.

The people being seconded to the new subsidiary have worked on standards initiatives across Microsoft, including the "W3C's HTML5, IETF's HTTP 2.0, cloud standards in DMTF and OASIS, and in many open source environments such as Node.js, MongoDB and Phonegap/Cordova."

Their job has been to provide "open source building blocks for interoperable cloud services and collaborate on cloud standards in DMTF and OASIS; support developer choice of programming languages to enable Node.js, PHP and Java in addition to .NET in Windows Azure; and work with the PhoneGap/Cordova and jQuery Mobile and other open source communities to support Windows Phone."

The new subsidiary notwithstanding, Microsoft and its business groups are still supposed "to engage with the open source and standards communities in a variety of ways, including working with many open source foundations such as Outercurve Foundation, the Apache Software Foundation and many standards organizations."

And no one is ever likely to accuse Microsoft of not gaming the standards process but that's what companies are supposed to do. They all do it. Actually Microsoft does it less than others and has been clumsier. Paoli could be its wolf in sheep's clothing appearing unbeholden to corporate interests.

Writing in Computerworld UK, Sun's old open source guy Simon Phipps made the point that "High-powered standards wonks are like spymasters; necessary to their political masters but with work that is usually better unseen."

He figures the subsidiary is the "ideal firewall to protect Microsoft from the risks it has been alleging exist in open source and open standards" and let it "respond to the inevitability of open source in their market without constant push-back from cautious and reactionary corporate process."

And nobody said Microsoft would stop cutting patent deals with Linux purveyors.

The new subsidiary is supposed to demonstrate Microsoft's "long-term commitment to interoperability, greater openness, and to working with open source communities."

It's also supposed to provide a "new way of engaging in a more clearly defined manner" and "help facilitate the interaction between Microsoft's proprietary development processes and the company's open innovation efforts and relationships with open source and open standards communities."

It should make it easier for Microsoft to "release open source software, participate in existing open source efforts, and accept contributions from the community."

"Over time," Paoli said, "the community will see greater interaction with the open standards and open source worlds" and ensure that users can "bridge Microsoft and non-Microsoft technologies together in heterogeneous environments." That key point is underplayed in Paoli's blog.

Microsoft's Azure cloud service allows open source software (expect the Big Data NonSQL MongoDB database there); it's got open source software of its own; it's contributed to open source projects like Hadoop; it's now one of top 20 contributors to the Linux kernel; and it's building its next operating system using HTML5.